Electric car tax credits & incentives
Last updated 2/2/2023
On average, the upfront cost of an electric vehicle is usually higher than a conventional gas-powered car. There are different types of EVs including an all-electric (AEV), aka battery electric vehicle (BEV) or zero-emissions vehicle (ZEV), or a plug-in hybrid (PHEV), which runs partially on battery power and partially on gasoline. There are several federal and state electric car tax credits and incentives that can lower the upfront cost so EV drivers can take advantage of fuel savings and reduced emissions.
Federal incentives for electric vehicles
The Inflation Reduction Act (IRA) of 2022 changed things a bit regarding the federal tax credit for EVs. It’s not as straightforward as it used to be with the Qualified Plug-in Electric Drive Motor Vehicle Credit, now known as the Clean Vehicle Credit. Various factors roll out over time impacting eligibility for the credit including the car’s purchase price, date of purchase, your income, and where the car and its battery are manufactured.
As of January 1, 2023, the following criteria apply to new EVs to determine whether or not it qualifies for the federal tax credit:
- Production location: final assembly of the vehicle must take place in North America.
- Vehicle pricing: vans, SUVs, and pickup trucks must have a manufacturer-suggested retail price (MSRP) at or below $80,000. All other vehicles (e.g. sedans and compact cars) can’t have an MSRP above $55,000.
- Your income: Eligibility is based on your adjusted gross income. Limits include a joint tax return of less than $300,000, a head of household tax return of less than $225,000, or a single taxpayer return of less than $150,000.
- Critical mineral and battery component limitations: currently delayed until the U.S. Treasury Department weighs in on rules and is expected to roll out in March 2023, additional requirements for where the vehicle’s battery components are sourced and manufactured must be met to earn the credit. Automakers and other countries are working to determine the exact implications. The Korean government has argued that the current stipulations outlined in the IRA go against the free trade agreement, so shouldn’t stand up. It remains to be seen exactly how this guideline will play out.
Purchase date implications
If you purchased your EV in 2022, there are different amounts you may qualify for based on the purchase date and the car you purchased. Learn more about other factors impacting EV incentives, including the EV’s purchase date and the battery component requirements.
Manufacturer sales cap
Previously, there were caps placed on manufacturers which meant that certain EV brands no longer qualified for EV credits. For example, Tesla and Chevrolet had met those caps. Still, as of January 1, 2023, that requirement is no longer applicable. As long as vehicles from those manufacturers meet the other requirements, including the price cap and final assembly location, they’re now eligible for the federal EV tax credit. So, a new Chevrolet Bolt EV which in 2022 wouldn’t receive the federal tax credit would likely be eligible in 2023 as long as its not loaded with upgrades to push it over $55,000.
Tax incentives for used vehicles
The IRA added credits for up to $4,000 or 30 percent of the sales price (the lower of the two) as long as it meets certain criteria:
- the model year is at least two years earlier than the calendar year in which you’re buying it
- costs less than $25,000
- it’s the first resale of the EV (the first time it’s being sold as a used vehicle)
Understanding which vehicles are eligible
Because of the various guidelines added through the IRA, it’s not always straightforward to know if a certain EV qualifies for the federal tax credit. Here are some popular automobile manufacturers and some general guidance on if they may qualify:
- Audi: Q5 PHEV may qualify if it’s not over $80,000; e-tron models are manufactured in Belgium, so don’t qualify
- BMW: 330e may qualify; other models usually won’t meet pricing cap or manufacturing location criteria
- Cadillac: The Lyriq was previously not eligible because of the manufacturer sales cap, but beginning in 2023 it is eligible again as long as it falls below the price cap
- Chrysler: The Pacifica PHEV usually will qualify
- Ford: The popular Mustang Mach-E usually will qualify
- Hyundai: popular Ioniq 5 EV is no longer eligible because they’re manufactured in South Korea
- Kia: EV6 and Niro models aren’t eligible because they’re manufactured in South Korea
- Nissan: the popular Nissan Leaf EV is usually eligible
- Rivian: previously eligible because it is made in the U.S., with the new price cap, Rivians won’t be eligble
- Tesla: previously not eligible because of the manufacturer sales cap, certain Tesla Model 3 and Model Y vehicles may be eligible in 2023; many Teslas may still not be eligible because of the price cap
- Toyota: no Toyota models are currently eligible
- Volkswagen: the ID.4 was previously not eligible but since it’s now being manufactured in Tennessee, newer versions should qualify
- Volvo: popular S60 EV is usually eligible
For detailed information, you can always plug in a vehicle identification number (VIN) to the Alternative Fuels Data Center website’s VIN decoder tool in order to see if it meets the criteria.
State and local EV tax credits
Aside from federal incentives, there are electric car tax credits and rebates at the state level that you can use to save further on an electric vehicle purchase and EV charger installation at your home (see an overview of available EV charger incentives). This list is of state incentives and does not include utility or private incentives. The Department of Energy’s Alternative Fuels Data Center also has information on incentives from states, utilities, and private organizations.
| State | Electric Car Tax Credit Program | Description |
|---|---|---|
| Alabama | None available | None available |
| Alaska | None available | None available |
| Arizona | None available | None available |
| Arkansas | None available | None available |
| California | Clean Air Vehicle and Clean Vehicle Rebate Project |
Offers rebates from $1,000 to $7,000 for the purchase or lease of new, eligible EVs, PHEVs, and fuel cell vehicles. Income caps and price caps exist. |
| San Joaquin Drive Clean Rebate Program |
Up to $3,000 rebates of qualifying electric vehicles for residents and businesses located in the San Joaquin Valley. |
|
| Colorado | Zero Emission Vehicle (ZEV) Tax Credits |
Credit of $2,000 to $8,000 or purchasing a BEV or PHEV, depending on the size and weight of the vehicle. Similar credit between $1,500 and $5,000 for leasing an EV or PHEV. They also offer credits for converting existing vehicles to a ZEV. |
| Connecticut |
Connecticut Hydrogen and Electric Automobile Purchase Rebate Program (CHEAPR) |
When you purchase a BEV that doesn’t exceed $50,000, you qualify for a $2,250 rebate. PHEVs qualify for a $750 rebate. There’s also a Rebate+ program with certain income eligibility noted to run through December 31, 2022 or until funds allocated are exhausted. |
| Delaware | Delaware Clean Vehicle Rebate |
New BEVs and PHEVs up to $60,000 purchased qualify for a rebate ($2,500 for BEVs and $1,000 for PHEVs). You must submit the rebate application within 90 days of your purchase date and their website notes that the program will continue until all funding has been exhausted or until April 30, 2023, whichever comes first. |
| EV Charging Equipment Rebates |
Provides up to 75 percent of the cost of installing Level 2 EV charging equipment (known as EVSE) for commercial, retail, fleet, or multifamily buildings (not residential EVSE), covering up to $7,000 for dual ports. |
|
| District of Columbia | Reduced vehicle taxes and fees for EVs |
DC residents purchasing EVs can get exemptions for their vehicle excise tax and get discounts on their vehicle registration fee. Pepco, one of DC’s largest utilities, does offer separate EV incentives and rebates for their customers. |
| Florida | None available | None available |
| Georgia | Electric Vehicle Charger Credit |
Eligible businesses receive an income tax credit of 10% up to $2,500 for the purchase or lease of EVSE when the equipment is in the state and open to the public. |
| Hawaii | None available | None available |
| Idaho | None available | None available |
| Illinois |
Offers rebate amounts from between $1,500 and $4,000 for EVs purchased or leased from 2022-2028 depending on when you get your EV. |
|
| Indiana | None available | None available |
| Iowa | None available | None available |
| Kansas | None available | None available |
| Kentucky | None available | None available |
| Louisiana | None available | None available |
| Maine |
Individuals, businesses, and organizations can receive rebates for EVs and PHEVs. Individuals can qualify for $500 to $7,500 depending on income while businesses can get rebates for work or fleet vehicles between $1,000 and $8,000. |
|
| Maryland | Electric Vehicle Supply Equipment (EVSE) Rebate Program |
Provides residential rebates of up to $700 and commercial rebates of up to $4,000 for the cost of acquiring and installing qualified charging equipment. The rebates are issued on a first-come first-serve basis while yearly funding lasts. |
| Plug-In Electric Vehicle (PEV) Tax Credit |
As of July 1, 2023 allows purchasers of qualified vehicles to apply for a tax credit of up to $3,000 and not more than $50,000 calculated as $100 per kWh of battery capacity. |
|
| Massachusetts | Massachusetts Plug-In Electric Vehicle (PEV) Rebates |
Provides rebates towards the purchase or lease of EVs with a purchase price of $55,000 or less and PHEVs with a purchase price of $50,000 or less. Eligible all-electric vehicles can receive up to $3,500 and eligible plug-in hybrid electric vehicles can receive up to $1,500. The rebate application must be submitted within three months of purchase or lease date and you must retain ownership of the vehicle for a minimum of 36 months. |
| Michigan | None available | None available |
| Minnesota | None available | None available |
| Mississippi | None available | None available |
| Missouri | None available | None available |
| Montana | None available | None available |
| Nebraska | None available | None available |
| Nevada |
None available |
None available |
| New Hampshire | None available | None available |
| New Jersey |
Offers incentives applied at point-of-sale of up to $4,000 for the purchase or lease of new, eligible zero-emission vehicles (including PHEV). |
|
| New Mexico | None available | None available |
| New York | Drive Clean Rebate |
Rebates of up to $2,000 for the purchase or lease of eligible new electric vehicles. The amounts vary based on the vehicle's all electric range and suggested retail price. |
| North Carolina | None available | None available |
| North Dakota | None available | None available |
| Ohio | None available | None available |
| Oklahoma | None available | None available |
| Oregon |
Offers rebates for the purchase or lease of new electric vehicles with a MSRP of $50,000 or less. Vehicles with batteries under 10 kWh are eligible for $1,500 and those with batteries of 10 kWh or more are eligible for $2,500. |
|
| Pennsylvania | Alternative Fuel Vehicle (AFV) Rebate |
Rebates offered to those who meet the income requirements to assist with the cost of the purchase or lease of all-electric vehicles and plug-in hybrid electric vehicles with a purchase price of less than $50,000. The rebate amounts are $2,000 for qualified EVs and $1,500 for qualified PHEVs. An additional $1,000 is available for those who meet the low-income requirement. |
| Rhode Island |
Driving Rhode Island to Vehicle Electrification (DRIVE EV) rebate |
Offers rebates of up to $2,500 for the purchase or lease of a new battery electric vehciles and $1,500 for the purchase or lease of a pre-owned ZEV. The purchase or lease of a new PHEV is eligible for up to $1,500 and a pre-owned PHEV is eligible for $750. |
| South Carolina | None available | None available |
| South Dakota | None available | None available |
| Tennessee | None available | None available |
| Texas | Drive Electric Vermont |
Electric vehicles powered by a battery or hydrogen fuel cell are eligible for a rebate of up to $2,500 for the first 2,000 applicants. |
| Utah | None available | None available |
| Vermont | Drive Electric Vermont |
Financial incentive of up to $4,000 for eligible purchases of new EVs and up to $5,000 for used high-efficiency vehicles. Must meet income requirements. |
| Virginia | None available | None available |
| Washington | Alternative Fuel Vehicle (AFV) Tax Exemption |
Sales tax exemption, applies to up to $20,000 of a vehicle's selling price for new vehicles and $16,000 for leased vehicles. The new vehicle’s eligible exemption amount will drop to $15,000 in August of 2023. |
| West Virginia | None available | None available |
| Wisconsin | Alternative Fuel Tax Refund for Taxis |
Allows vehicles that transport passengers to be reimbursed for the paid amount of the Wisconsin state fuel tax. Refund claims must be filed within one year of the fuel purchase date. |
| Wyoming | None available | None available |
Form 8936 instructions: claiming the federal electric vehicle tax credit
To claim the federal electric vehicle tax credit once you buy an electric car, you'll need to fill out IRS Form 8936 and report the proper credit from it on Form 1040 (Individual Income Tax Return). The IRS gives detailed instructions for how to fill out these forms on their website, but we've broken down some of the main points here:
- You’ll need your electric car’s make, model, and vehicle identification number (VIN)
- You will enter the date the car was placed in service (when you took delivery and started driving it)
- For vehicles with at least four wheels, you’ll enter the credit amount for your vehicle's make and model found on the IRS site
- Your eligible tax credit also depends on your EV’s manufacturer.
- For Tesla, the credit is not available for vehicles acquired after December 31, 2019. Beginning in 2023, Teslas that meet the price requirements will be eligible again.
- For GM, the credit is not available for vehicles acquired after March 31, 2020. Beginning in 2023, GM electric vehicles that fall under the price cap will be eligible again.
- It’s important to note that EV tax credits are likely to change based on the IRA guidelines. We’ll keep you up to date on the latest information and you can always confirm with the IRS website or a tax professional.
Additional EV incentives rolling out
There are additional components of the Clean Vehicle Credit rolling out as part of the IRA legislation. For example, eventually you’ll be able to transfer the credit to your car dealer or seller and claim it at the point of purchase to get a reduced price. However, this doesn’t roll out until after December 31, 2023.
Learn other ways to save with EVs
Overall, EVs usually cost less to own that gas-powered vehicles because of the reduced ownership and maintenance costs. Additionally, there are many ways to save on EV charging costs over time, such as taking advantage of special rates like time-of-use rates or off-peak charging programs with your utility company. Going solar is one of the best long-term solutions to lower your home EV charging costs. You can use the EnergySage Marketplace to compare several quotes from pre-screened installers, helping you find a system that fits your needs at the right price.
